NISM-Series-XV: Research Analyst Certification Examination Notes
Research Analyst Profession: Collection of information, then analysis for investment decisions.
Economic Information: Macro and micro factors from sources like the Reserve Bank of India, IMF, ADB, and World Bank.
Qualitative Factors: Efficiency of operations, competitiveness, business plans, and management ethics.
Quantitative Factors: Revenues, costs, profitability, and financial risks.
Sell-Side Analysts: Publish research reports with buy, hold, or sell recommendations, including earnings expectations and price targets.
Buy-Side Analysts: Work for asset managers, generating internal investment recommendations.
Independent Research Analysts: Sell research on a subscription basis to various clients, including investors and institutions.
Economic understanding involves analyzing macro-economic factors, fiscal/monetary policies, FDI/FPI flows, and global impacts.
Industry analysis requires understanding regulatory environment, business models, competition, and consumer behavior.
Company analysis involves qualitative (strengths, weaknesses, management) and quantitative (financials) assessments.
Pre-meeting Research: Thoroughly learn about the company’s products, industry, and competitors.
Independence and Neutrality: Maintain unbiased opinions based on factual information.
Networking: Use contacts for meaningful insights into the company’s performance and plans.
Clarity of Questions: Have clear and specific questions for company management.
Realistic Suggestions: Base suggestions on facts and figures, avoiding biased views.
Simple Communication: Use clear, concise language in written reports.
Conflict Disclosure: Disclose any conflicts of interest beforehand.
Assumption Transparency: Clearly state any assumptions in research reports.
Honesty & Ethics: Perform role with sincerity and ethics, following SEBI rules.
Key qualities include numerical skills, Excel proficiency, financial concept clarity, and communication abilities.
Securities: Transferable financial instruments showing indebtedness or ownership interest (e.g., shares, bonds, debentures).
Securities Market: Facilitates buying and selling of securities, creating liquidity and enabling transfer of resources.
Financial Market Participants: Include investors, borrowers, intermediaries, and regulatory bodies.
Examples of Securities: Shares, bonds, derivatives, mutual fund units, and government securities.
Equity Shares: Represent fractional ownership in a business venture.
Debentures/Bonds/Notes: Instruments for raising long-term debt, which can be secured or unsecured, convertible or non-convertible.
Foreign Currency Bonds: Bonds issued in a currency different from the issuer's home country currency.
External Bonds/Masala Bonds: Bonds issued in a currency different from the country of issuance; Masala bonds are INR-denominated bonds issued outside India.
Warrants: Options to buy equity shares of the issuer company at a predetermined price after a specified time.
Indices: Track market movement using prices of representative shares, weighted by market capitalization.
Mutual Funds: Investment vehicles pooling money from investors to invest in a portfolio of securities.
Exchange Traded Funds (ETFs): Track an index or commodity and are traded on a stock exchange.
Preference Shares: Hybrid securities with features of both equity and debt.
Convertible Debentures & Bonds: Debt instruments convertible into equity shares at a future date.
Depository Receipts (DRs): Financial instruments representing shares of a foreign company, trading in the local market.
Foreign Currency Convertible Bonds (FCCBs): Foreign currency denominated convertible debt papers.
Equity Linked Debentures (ELDs): Floating rate debt instruments linked to the returns of an underlying equity asset.
Commodity Linked Debentures (CLDs): Floating rate debt instruments based on the returns of an underlying commodity asset.
Mortgage Backed Securities (MBS) and Asset Backed Securities (ABS): Debt instruments secured by receivables from financial assets.
REITs/InvITs: Investment vehicles that pool money to invest in revenue-generating real estate and infrastructure projects, respectively.
Commodities: Basic materials or goods that are largely homogenous, including precious metals.
Primary Market: Issuers raise capital by issuing fresh securities to investors.
Secondary Market: Trades in already-issued securities, providing liquidity to investors.
Public Issue: Securities offered to the general public.
Initial Public Offer (IPO): First sale of a corporate’s common shares to investors.
Follow on Public Offer (FPO): Further issue of shares or offer for sale by an already listed company.
Private Placement: Issuing shares to a select set of investors.
Qualified Institutional Placements (QIPs): Private placement of shares to qualified institutional buyers.
Preferential Issue: Issuing securities to select persons on a private placement basis.
Rights and Bonus Issues: Securities offered to existing shareholders at a specific price (rights) or without consideration (bonus).
Onshore and Offshore Offerings: Issuers can issue securities in the domestic market (onshore) or outside the country (offshore).
Offer for Sale (OFS): Existing shareholders offer shares to the public; proceeds go to the offerors.
Sweat Equity: Shares issued to employees or promoters as reward for their contribution.
Employee Stock Option Scheme (ESOPs): Options given to employees to buy company shares at a predetermined price.
Over-The-Counter Market (OTC Market): Trades negotiated directly between counterparties.
Exchange Traded Markets: Trading and settlement done through stock exchanges.
Clearing and Settlement: Post-trading activities handled by clearing corporations.
Risk Management: Clearing corporations provide settlement guarantees and manage risk through margins.
Stock Exchanges: Provide a trading platform for securities.
Depositories: Hold securities in electronic form.
Depository Participants: Agents of depositories interfacing with investors.
Trading Members: Registered members of a stock exchange facilitating buy and sell transactions.
Authorised Person: Agents appointed by stock brokers to reach out to investors.
Custodians: Entities responsible for holding funds and securities of large clients.
Clearing Corporation: Ensures members meet obligations and guarantees settlement.
Clearing Banks: Facilitate transactions between clearing members and clearing corporations.
Merchant Bankers: Act as issue managers and investment bankers.
Underwriters: Guarantee to subscribe to any portion of a public offer not bought by investors.
Foreign Portfolio Investors (FPIs): Entities established outside India investing in Indian securities.
P-Note Participants: Issue participatory notes to overseas investors wanting to invest in Indian stock markets without direct registration.
Mutual Funds: Managed investment schemes that pool money to purchase securities.
Insurance Companies: Invest premiums in securities, government securities, and other bonds.
Pension Funds: Manage retirement funds for employees.
Venture Capital Funds: Invest in early-stage enterprises with long-term growth potential.
Private Equity Firms: Provide funding to companies for growth, expansion, or buy-outs.
Hedge Funds: Investment vehicles that pool capital and invest across various assets and geographies.
Alternative Investment Funds: Privately pooled investment schemes investing in various asset classes.
Investment Advisers: Help investors with asset allocation and investment choices.
Employee Provident Fund (EPF): Provides retirement benefits to employees.
National Pension Scheme (NPS): Government-sponsored retirement scheme.
Family Offices: Manage wealth for wealthy families.
Corporate Treasuries: Invest surplus funds for potential future opportunities.
Retail Investors: Individual investors buying and selling securities for their personal account.
Proxy Advisory Services Firms: Advise investors on exercising their rights in the company.
Cash Trades: Settlement occurs on the same trading day.
Tom Trades: Settlement occurs on the day next to the trading day.
Spot Trades: Settlement occurs two business days after the trade date.
Forward Contracts: Agreements to buy or sell an asset at a future date for a predetermined price.
Futures: Standardized exchange-traded forward contracts.
Options: Contracts giving the right, but not the obligation, to buy (call) or sell (put) an asset at a specified price on or before a stated date.
Swaps: Derivative contracts to exchange cash flows in the future based on a pre-arranged formula.
Trading: Buying or selling an asset in anticipation of a gain from price changes.
Hedging: Taking a position to offset potential losses.
Arbitrage: Simultaneous purchase and sale of an asset to profit from price discrepancies.
Pledging of shares: Taking a loan against securities.
Dematerialization: Converting securities held in physical form into electronic form.
Rematerialization: Converting securities held in electronic form into physical form.